Fresh hopes about a global economic recovery drove the blue-chip index to a
new four-and-a-half year high, as it rose 1.1pc higher and encouraged
traders to air bullish takeover gossip.

One tale doing the rounds is that Chinese oil company Sinopec is keen on acquiring Afren, the FTSE 250-listed oil explorer with operations in Africa and the Kurdistan region of Iraq.

Afren shares leapt 10pc on Wednesday on speculation the company will either unveil positive drilling results from its Papai well in Kenya or announce a takeover offer from a potential bidder.

Traders said Sinopec – which already has a major presence in West African oil and gas exploration following its £4.5bn acquisition of Aim-listed Addax Petroleum in 2009 – is rumoured to be interested in paying between 215p and 250p a share for Afren, down 0.6 to 151.4p.

Vodafone gained 5.2 to 168.6p as Bloomberg reported that weakness in Europe means now is one of the most opportune moments for the London-listed telecoms group to sell its 45pc stake in America's Verizon Wireless for $115bn (£72bn) to Verizon Communications. Vodafone, an analyst said, could use the proceeds from the sale to shore up its European business.

Meanwhile, hedge fund investor David Einhorn said yesterday he had increased his stake in Vodafone.

The insurance sector also experienced a fresh bout of deal-making speculation. Morgan Stanley argued Prudential should follow in rival Aviva's footsteps and break itself up by selling its US business, the Jackson National Life Insurance Company.

Jon Hocking, an analyst at Morgan Stanley, said: "Although Jackson benefits from group support – and would therefore need to improve its standalone capitalisation – we think this could be achieved relatively easily."

He added that a sale of Jackson may drive Prudential shares higher, assuming the proceeds from any disposal are returned via a special dividend. Mr Hocking has an "overweight" rating on the stock because he also thinks Prudential offers investors an unusual combination of "improving cash generation, defensiveness and growth". Prudential put on 16 to 938p.

Still with insurers, Aviva – which last month sold its US life business to private equity firm Apollo for £1.1bn – rose 5.9 to 374½p as JP Morgan gave the company an "overweight" rating and a price target of 443p.

Overall, the FTSE 100 climbed 67.27 points to 6264.91 e_SEnD its highest level since May 2008 after the release of good economic data. Dealers were buoyed by a Markit and HSBC survey showing that Chinese manufacturing expanded at its fastest rate in two years. Eurozone services and manufacturing output also contracted at a slower pace this month than economists had estimated and first-time jobless claims in the US unexpectedly dropped last week to 330,000, the fewest since the same week in 2008.

The FTSE 250 also had a good day, putting on 132.04 points to 13066.44.

Back among the blue-chips, chemical company Croda benefited from an upbeat note from JP Morgan. Analyst Martin Evans said: "Croda is likely to appeal to investors as confidence returns." Croda rose 79p to £24.37.

United Utilities had another good day, perking up 30 to 747½p, after Bank of America Merrill Lynch upgraded the shares to "neutral" from "underperform". The broker still believes risks from the 2014 regulatory review may hold back the share price next year, but the hope of M&A will support the stock in the near term.

However, yesterday Gary Dixon, customer services director at United Utilities, sold 1,400 shares at 707p a piece, implying the company is unlikely to have received any takeover approach.

Bank of America also upgraded Severn Trent, up 31p to £16.35, to "neutral" from "underperform".

On a less positive tack, Wm Morrison slipped 2.2 to 257p as Goldman Sachs reiterated its "sell" rating. Analysts at the broker said: "We continue to view Morrisons as a poorly positioned company within UK food retail, with relatively weak market share relative to competition, low exposure to the convenience channel and currently no online food business."

Among the second-liners, online gaming company bwin.party leapt 12½ to 113.8p after a German court referred a treaty that restricts online gaming to the European Court of Justice. Yesterday's ruling removes some of the uncertainty over online gaming companies operating in Germany, one of bwin's biggest markets.

easyJet put on 43½ to 898½p after a first-quarter trading update that pleased some analysts. The low-cost airline reported revenues per seat up 8pc in the first quarter with costs per seat up 2.9pc. Credit Suisse raised its target price to £10.00 from 884p and called the company's revenue per seat performance "impressive".

Ladbrokes moved 6.7 higher to 206.1p as chief executive Richard Glynn made his first acquisition since taking over at the bookie three years ago with the purchase of betting exchange Betdaq for about €30m (£25m).

Elsewhere in the leisure sector, Fuller Smith Turner, the brewing and pub company, put on 25 to 785½p after a decent trading update. In the nine weeks to January 19, 2013, like-for-like sales in managed pubs and hotels were up 4.5pc.

Irn-Bru maker AG Barr rose 26½ to 546½p after its pre-close update revealed that all of its core brands grew in the year despite poor summer weather. Total sales in the final quarter will be more than 5pc ahead of the prior year, while full-year revenues are expected to come in at £253m, reflecting year-on-year growth of about 7pc.

The Telegraph Investor

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Priced to be great value for new investors and those with large portfolios.